If people suddenly start to expect the price of oil to rise less rapidly than the interest rate, the ...

If people suddenly start to expect the price of oil to rise less rapidly than the interest rate, the demand for oil ________ and the supply of oil ________.
 
  A) increases; increases
  B) increases; decreases
  C) decreases; decreases
  D) decreases; increases

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Ques. 2

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.
 
  What will be an ideal response?

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Ques. 3

Based on the cost data in the above table, the long-run average cost (LRAC) is lowest when output is
 
  A) 20.
  B) 40.
  C) 80.
  D) Long-run average cost is constant at all levels of output.

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Ques. 4

For a nonrenewable natural resource, such as oil, the equilibrium price ________ the market fundamentals price.
 
  A) is always the same as
  B) can be greater than but not less than
  C) can be less than but not greater than
  D) can be less than, greater than, or equal to

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Ques. 5

In the above figure, income is 8, the price of a soft drink is 1, and the initial price of a milkshake is 2. If the price of a milkshake decreases to 1, the income effect is the movement from point ________ to point ________.
 
  A) a; b
  B) b; d
  C) b; c
  D) a; c

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Ques. 6

Moral hazard occurs when an agreement encourages undesirable behavior.
 
  Indicate whether the statement is true or false

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Ques. 7

In the short run, a firm in monopolistic competition produces where P = MC.
 
  Indicate whether the statement is true or false